Were sales of timeshare cooperative shares and shareholders' annual common-expense assessments subject to Florida sales, transient-rental, or local tourism taxes?

Plain-English summary

Neither the timeshare cooperative shares nor the shareholders' annual common-expense assessments were subject to the transaction taxes addressed. The share purchaser acquired an ownership interest with occupancy rights and property-owner burdens, not a lease, license, transient accommodation, or tangible item.

The annual assessment paid each shareholder's proportionate share of maintenance, ad valorem tax, management, reservation-system administration, and other cooperative expenses. It was not rent or a transient-lodging charge.

Because Florida's state transient-rental tax did not apply to the share sale or assessment, the related local tourist-development and convention-development taxes did not apply either.

What this means for you

The legal structure mattered: cooperative ownership with inseparable occupancy rights and common-expense obligations was treated differently from renting a timeshare unit or paying for transient lodging.

Common questions

Q: Was the cooperative stock sale subject to sales tax? No.

Q: Was it treated as real-property rent or transient lodging? No.

Q: Were annual assessments taxable as rent? No.

Q: Did local tourist or convention taxes apply? No.

Citations and references

• Fla. Stat. §§ 212.05, 212.031(1)(a), (c), and 212.03(1) — sales, commercial rent, and transient rentals
• Fla. Stat. §§ 212.0305(3)(a) and 125.0104(3)(a) — convention and tourist development taxes
• Fla. Stat. §§ 212.02(19), 719.013(25), 719.103(13), 719.105, and 721.05(32) — stock, cooperative, and timeshare interests
• Fla. Admin. Code r. 12A-1.061(3)(h)14., 15. — cooperative assessments and timeshare estates
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-072

Original ruling text

SUMMARY

QUESTION 1: Is the sale of shares of stock in a timeshare
cooperative subject to sales and use tax?

ANSWER 1 - Based on Facts Below: No. The sale of stock in
the subject timeshare cannot be characterized as the
rental, leasing, letting or granting of a license to use
real property, the rental, leasing, or letting of transient
living accommodations, or as the sale, leasing, letting, or
rental of tangible personal property. Therefore, the taxes
imposed by s. 212.03, 212.031, and 212.05, F.S., are not
applicable.

QUESTION 2: Is the sale of shares of stock in a timeshare
cooperative subject to the local tourist development tax or
the convention development tax?

ANSWER 2 - Based on Facts Below: No. The state tax on
transient rentals is not applicable to the sale of shares
of stock in the subject cooperative. Accordingly, the
convention development and tourist development taxes are
not applicable.

QUESTION 3: Are annual assessment fees paid by shareholders
to a timeshare cooperative subject to sales and use tax?

ANSWER 3 - Based on Facts Below: No. The annual assessment
fees cannot be construed as rental payments or charges for
transient accommodations. Accordingly, the taxes imposed
by s. 212.03 and s. 212.031, F.S., are not applicable.

QUESTION 4: Are annual assessment fees paid by shareholders
to a timeshare cooperative subject to local tourist
development tax or convention development tax?

ANSWER 4 - Based on Facts Below: No. The annual assessment
fees cannot be construed as charges for transient
accommodations. Accordingly, the convention development
and tourist development taxes are not applicable.

Dec 10, 2001

Re: Technical Assistance Advisement 01A-072
XXX ("Company")
F.E.I.# XX
Sales and Use Tax - Taxability of Stock Shares and Annual
Assessments
Sections: 212.05, 212.031(1)(a) and (c), 212.03(1),
212.0305(3)(a), 125.0104(3)(a), F.S.
Rule: 12A-1.061(3)(h) 14., 15., F.A.C.

Dear :

This is in response to your letter dated July 27, 2001, received
August 1, 2001, which requests that the Department issue a
Technical Assistance Advisement ("TAA") concerning the above
referenced matter. Your letter has been carefully examined and
the Department finds it to be in compliance with the requisite
criteria set forth in Chapter 12-11, F.A.C. This response to
your request constitutes a TAA and is issued to you under the
authority of section 213.22, F.S.

The Department of Revenue does not have authority to issue a TAA
pursuant to Section 213.22, F.S., and Chapter 12-11, F.A.C., on
property tax issues. Property tax is imposed and administered
at the local level and not at the state level. However, you
will receive a response to that portion of your request for a
TAA on property tax under separate cover.

The Department is responding separately to your inquiries
regarding the Documentary Stamp Tax and Intangible Tax issues.
This response concerns only the Sales Tax issues raised in your
TAA request.

Facts

The Company is in the business of acquiring and developing
timeshare properties. The Company's initial development will be
located in XXX ("County"). The Company intends to develop

properties at other locations, including locations outside
Florida.

The Company will acquire real property timeshare interests in
two existing condominium projects that are adjacent to one
another in County. Once the Company acquires such timeshare
interests, the Company will convey the timeshare interests to
its timeshare development ("Cooperative") in exchange for all of
the authorized shares of the Cooperative. The condominium
projects include two bedroom residential units that are
independent housekeeping units with facilities for cooking,
sleeping and sanitation normally found in a principal residence.
At a later time, the Company may contribute to the Cooperative
additional real property, some of which may be located outside
of Florida. The Cooperative will subject the residential real
property to a timeshare regime.

The Company will sell shares it owns in the Cooperative to
purchasers. The Company will offer purchasers the opportunity
to finance their share purchases over time. As an incident of
stock ownership, each purchaser of shares in the Cooperative
will acquire occupancy rights to a unit in the Cooperative's
property for a portion of each year. Purchasers of Cooperative
shares will be prohibited from transferring or selling their
stock in the Cooperative separately from their occupancy rights.

An incident of stock ownership in the Cooperative will be
membership in a reservation and exchange system (the "Club")
operated by the Company or its affiliate. Shareholders will go
through the Club to reserve and use the accommodations at the
Cooperative.

The Cooperative will assess each shareholder annually for
maintenance and other expenses of the property. The expenses
will include ad valorem taxes payable by the Cooperative on its
real property. Other expenses will include amounts paid to the
manager under a management agreement to manage Cooperative's
property and amounts paid to the Company or its affiliate to
administer the Club.

A shareholder will have all the rights and powers incident to

the ownership of Cooperative shares. The shareholder will have
the right to sell, mortgage, or hypothecate his shares. The
shareholder will benefit from any increase in the value of his
shares and suffer the consequences of any loss in value of the
shares. The shareholder will be free to use his timeshare
period subject only to the rules of the Cooperative applicable
to all other shareholders.

Applicable Statutes and Rules

Section 212.05, F.S., provides in pertinent part:

It is hereby declared to be the legislative intent that
every person is exercising a taxable privilege who engages
in the business of selling tangible personal property at
retail in this state, including the business of making mail
order sales, or who rents or furnishes any of the things or
services taxable under this chapter, or who stores for use
or consumption in this state any item or article of
tangible personal property as defined herein and who leases
or rents such property within the state.

(1) For the exercise of such privilege, a tax is levied on
each taxable transaction or incident, which tax is due and
payable as follows:

(a)1.a. At the rate of 6 percent of the sales price of each
item or article of tangible personal property when sold at
retail in this state, computed on each taxable sale for the
purpose of remitting the amount of tax due the state, and
including each and every retail sale.

Section 212.03(1), F.S., provides:

(1) It is hereby declared to be the legislative intent that
every person is exercising a taxable privilege who engages
in the business of renting, leasing, letting, or granting a
license to use any living quarters or sleeping or
housekeeping accommodations in, from, or a part of, or in
connection with any hotel, apartment house, roominghouse,
or tourist or trailer camp. However, any person who rents,

leases, lets, or grants a license to others to use, occupy,
or enter upon any living quarters or sleeping or
housekeeping accommodations in apartment houses,
roominghouses, tourist camps, or trailer camps, and who
exclusively enters into a bona fide written agreement for
continuous residence for longer than 6 months in duration
at such property is not exercising a taxable privilege. For
the exercise of such taxable privilege, a tax is hereby
levied in an amount equal to 6 percent of and on the total
rental charged for such living quarters or sleeping or
housekeeping accommodations by the person charging or
collecting the rental. Such tax shall apply to hotels,
apartment houses, roominghouses, or tourist or trailer
camps whether or not there is in connection with any of the
same any dining rooms, cafes, or other places where meals
or lunches are sold or served to guests.

Section 212.031(1)(a) and (c), F.S., provides in pertinent part:

(1)(a) It is declared to be the legislative intent that
every person is exercising a taxable privilege who engages
in the business of renting, leasing, letting, or granting a
license for the use of any real property....

(c) For the exercise of such privilege, a tax is levied in
an amount equal to 6 percent of and on the total rent or
license fee charged for such real property by the person
charging or collecting the rental or license fee. The total
rent or license fee charged for such real property shall
include payments for the granting of a privilege to use or
occupy real property for any purpose and shall include base
rent, percentage rents, or similar charges. Such charges
shall be included in the total rent or license fee subject
to tax under this section whether or not they can be
attributed to the ability of the lessor's or licensor's
property as used or operated to attract customers. Payments
for intrinsically valuable personal property such as
franchises, trademarks, service marks, logos, or patents
are not subject to tax under this section....

Section 212.0305(3)(a), F.S., provides:

The convention development tax on transient rentals imposed
by the governing body of any county authorized to so levy
shall apply to the amount of any payment made by any person
to rent, lease, or use for a period of 6 months or less any
living quarters or accommodations in a hotel, apartment
hotel, motel, resort motel, apartment, apartment motel,
roominghouse, tourist or trailer camp, mobile home park,
recreational vehicle park, or condominium. When receipt of
consideration is by way of property other than money, the
tax shall be levied and imposed on the fair market value of
such nonmonetary consideration. Any payment made by a
person to rent, lease, or use any living quarters or
accommodations which are exempt from the tax imposed under
s. 212.03 shall likewise be exempt from any tax imposed
under this section.

Section 125.0104(3)(a), F.S., provides:

It is declared to be the intent of the Legislature that
every person who rents, leases, or lets for consideration
any living quarters or accommodations in any hotel,
apartment hotel, motel, resort motel, apartment, apartment
motel, roominghouse, mobile home park, recreational vehicle
park, or condominium for a term of 6 months or less is
exercising a privilege which is subject to taxation under
this section, unless such person rents, leases, or lets for
consideration any living quarters or accommodations which
are exempt according to the provisions of chapter 212.

Rules 12A-1.061(3)(h) 14., F.A.C., provides:

(h) The following is a non-inclusive list of charges
separately itemized on a guest's or tenant's bill, invoice,
or other tangible evidence of sale that are NOT rental
charges or room rates for transient accommodations:

14. Assessments for maintenance and other expenses of the
    property charged by a corporation to a stockholder who
    resides in an apartment house.

15. Consideration paid by a timeshare owner for the
purchase of a timeshare estate, as defined in s. 721.05,
F.S.

Requested Advisement

I. The sale of shares of stock in the Cooperative will not be
subject to a) sales and use tax imposed by ss. 212.05, 212.031,
or 212.03, F.S., or b) the local tourist development tax imposed
by s. 212.0305, F.S., or convention development tax authorized
by s. 125.0104, F.S.

II. The annual assessments the shareholders pay to the
Cooperative will not be subject to a) sales tax or b) local
tourist development tax or convention development tax.

Sale of Shares of Cooperative Stock

A six percent sales tax is imposed by the State of Florida upon
the exercise of the following privileges within this state: 1)
the rental, leasing, letting or granting of a license to use of
real property, 2) the rental, leasing or letting of any
transient living quarters, and 3) the sale of tangible personal
property at retail. See s. 212.031, s. 212.03, and s. 212.05,
F.S.

A purchaser of stock in a timeshare cooperative, as in the
instant case, acquires an interest that is statutorily required
to be recorded in the public records of the State under s.
201.02, F.S. As an owner of an interest in a cooperative
corporation, the purchaser is vested with certain rights and
privileges, including the right to determine the management of
the property of the corporation, as well as the right to sell,
mortgage, or hypothecate his or her interest. The purchaser is
also required to bear the risk of any burdens associated with
property ownership. Such burdens include assessments for
maintenance and operation of the property. See Chapter 719,
F.S.; s. 721.05(32), F.S.

The rights and burdens of a purchaser that acquires an interest
in a timeshare cooperative, as in the instant case, are not

characteristic of a lessee, licensee, or tenant. Instead, these
rights and burdens are analogous to those of a property owner.
In fact, s. 721.05(32), F.S., provides that a "timeshare estate"
includes "... an interest in a cooperative unit pursuant to s.
719.013..." Under s. 719.013(25), F.S., a unit owner is any
person holding a share in the cooperative association and having
possession of a unit granted by the association as owner of the
cooperative property. Thus, in this case, the purchaser, who is
holding a share in the timeshare cooperative and is granted
possession rights to a cooperative unit, is acquiring a
timeshare estate. Accordingly, the sale of stock in the subject
timeshare cannot be characterized as the rental, leasing,
letting or granting of a license to use real property, or as the
rental, leasing, or letting of transient living accommodations.
Therefore, the taxes imposed by s. 212.03 and s. 212.031 do not
apply to the sale of stock in the subject timeshare cooperative.
See Rule 12A-1.061(3)(h) 15., F.A.C.

The purchaser of a cooperative timeshare interest, as in the
instant case, acquires a stock interest in a cooperative
corporation and a coincident right of occupancy of a particular
dwelling unit in the building owned by the cooperative
corporation. See s. 719.103(13), 719.105, F.S. The statutory
definition of "tangible personal property" specifically excludes
"stocks, bonds, notes, insurance or other obligations or
securities." See s. 212.02(19), F.S. Accordingly, as a stock
interest in a corporation, an interest in a cooperative is
expressly excluded from the definition of "tangible personal
property." Thus, the sales tax imposed on the sale of tangible
personal property under s. 212.05, F.S., is not applicable to
the sale of the shares of stock in the subject cooperative.

Annual Assessment Paid to the Cooperative by Its Shareholders

Rule 12A-1.061(3)(h) 14., F.A.C., provides that assessments for
maintenance and other expenses related to real property are not
rental payments or rooms rates for transient rental when such
assessments are charged by a corporation to a stockholder who
resides in an apartment house. In the instant case, the annual
assessments paid by shareholders will be utilized by the
timeshare cooperative to cover the maintenance and other

expenses of the cooperative's property, as well as for the
administration and management of the cooperative corporation.
The annual assessment represents a shareholder's payment of his
pro-rata share of the common expenses of the timeshare
cooperative. Accordingly, the annual assessment cannot be
construed as a rental payment or charge for a transient
accommodation. Thus, the taxes imposed by s. 212.03 and s.
212.031 do not apply to the subject annual assessments.

Local Tourist Development Tax and Local Convention Development
Tax

County governments may impose a tourist development tax and a
convention development tax on transactions subject to the state
tax on transient rentals imposed by s. 212.03, F.S. As
discussed previously, the state tax on transient rentals is not
applicable to the sale of shares of stock in the subject
cooperative, or to the annual assessments. Accordingly, the
convention development and tourist development taxes do not
apply to either of these types of transactions. See ss.
125.0104(3)(a) and 212.0305(3)(a), F.S.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response, your request and
related backup documents are public records under Chapter 119,
F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses

and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

Case A. Bodiford
Attorney
Control # 46182